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Bootstrapped pharma company from Surat launches IPO

Team YS
posted on 27th April 2017
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Surat-based pharma company Zota Healthcare Limited is launching its initial public offering (IPO) today. Zota announced the pricing of its IPO of 46,80,000 equity shares with a face value of Rs 10 per share at a price band of Rs 121–125. The offer consists of fresh issue of 31,80,000 equity shares and the sale of 15,00,000 equity shares. The available bid lot is for 1,000 equity shares.

Started in 2000 and completely bootstrapped, Zota has a strong distribution network, wide product range, 19 patent products of which six have registered patents, export registration in 17 countries with 200 products, and experienced promoters.

Profitable since 2002, as of FY 2016, the company had clocked revenues of Rs 65 crore. Ketan Zota, Chairman of Zota Healthcare, says that apart from following the normal procedure for IPO as per the SME guidelines provided by SEBI and the National Stock Exchange, the team also hired a merchant banker for the same.

The company has an EBITDA margin at 16–17 percent, which Ketan says will increase in the years to come. Himanshu Zota, Director at Zota Healthcare, adds that they are going public mainly to raise funds to finance the company’s expansion plans in the Indian and foreign markets. Himanshu also believes that in this current growth stage, the listing will add value to their branding and increase their acceptability among dealers.

“While our products are approved by the regulator, the IPO will strengthen customer confidence. In addition to operational benefits, the IPO will also bring in advantages like tax benefits, talent retention, and increased corporate governance. We believe that for a firm of our size the IPO is a perfect platform to raise capital in a cost-effective manner,” says Himanshu.

Zota’s portfolio comprises a wide range of pharmaceutical formulations along with nutraceutical and ayurvedic products. Its products are available not just in India but also in countries across Asia, Africa, CIS, and Latin America.

Ketan feels they have done considerably well in expanding their business operations. With this IPO, they look forward to creating shareholder wealth for all investor classes including HNIs and institutional and retail investors with a long-term investment perspective.

“Additionally, with our increasing international presence and approvals granted for our export businesses, the investor wealth is geared to grow in tandem with the growth of the company,” says Ketan.

Over the years, the company has seen a consistent revenue growth in domestic operations from Rs 32 crore in 2012 to Rs 65 crore in 2016. The company plans to offer the shares at a premium to the face value with hopes to make the IPO valuation around Rs 58 crore.

Zota complies with the norms set by WHO (certified by Food & Drug Control Administration, India) which helps keep its products in line with international quality standards. It has over 1,000 distributors and a team of over 100 medical representatives.

According to a Mint report, last April, Mumbai-based healthcare and diagnostics company Thyrocare Technologies Limited’s IPO was oversubscribed 73 times as investors bet on the growth potential of its business. Mint stated that Thyrocare’s stock jumped 39 percent on debut in early May.

Apart from that, in the last year, Alkem Laboratories, Dr Lal Pathlabs, and Syngene International were other healthcare companies that tapped the primary markets. In 2016, over 11 companies raised close to Rs 7,800 crore through the IPO route.

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